Americas Office Fit Out Cost Guide 2023

FLIGHT TO QUALITY WILL DRIVE DEMAND

CLASS A SHARE OF OVERALL LEASING,4-QUARTER ROLLING TOTAL

In the evolving nature of the workplace, it has become clear that quality outperforms. At the onset of the pandemic, the share of Class A space as a percent of market leasing fell from 60% in Q1 2020 to 57% in Q2 2021. This trend began reversing in Q3 2021 as a wider return to office showed occupiers gravitating to Class A space, a reflection of employee preferences. A preference for newer, Class A space has led to stronger rent growth in this segment of the office sector, highlighting to landlords the advantages of repositioning existing assets to better compete with newer inventory. A recent survey of landlord priorities by VTS illustrates this growing shift to higher quality, highly amenitized space with 54% of landlords planning to redevelop their office asset(s) and 55% planning to add new amenities. These priorities include the implementation of a suite of hospitality-like experiences for tenants with the goal to increase occupancy by retaining current tenants and attracting new ones where possible. With these priorities set for 2023, demand for office fit outs is likely to increase as landlords focus on competing with top tier assets.

61%

60%

59%

58%

57%

56%

55%

2021 Q1

2018 Q1

2019 Q1

2021 Q2

2022 Q1

2021 Q3

2018 Q2

2018 Q3

2019 Q2

2019 Q3

2021 Q4

2018 Q4

2020 Q1

2019 Q4

2022 Q2

2022 Q3

2022 Q4

2020 Q2

2020 Q3

2020 Q4

Source: Cushman & Wakefield Research

FOR THE 10 YEARS LEADING UP TO THE PANDEMIC, 75% OF POSITIVE ABSORPTION WAS IN CLASS A ASSETS. SINCE Q2 2020, ABSORPTION HAS BEEN NEGATIVE, BUT ONLY 47% OF IT HAS BEEN CLASS A OFFICE. THE CBD TREND HAS BEEN SIMILAR.

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Cushman & Wakefield